Corporation Government, Performance and CEO Compensation

In order to studies the effect of performance and corporate governance on CEO compensation, we empirically analyze Chinese listed companies' financial data from 2005 to 2008. Based on the qualitative analysis, we depose the relevant factors and use multiple regression method to find the relationship between CEO compensation and company's performance and corporate governance. We find that CEO compensation is positively correlated with accounting performance and market performance during the Chinese listed company's remuneration reform and CEO compensation is positive with many corporate governance factors such as tenure, duality, director members and independent director ratio, whether CEOs can set their own pay by power. However, Supervisory Board can decrease CEO compensation. CEO compensation would decrease by the first shareholder equity ratio but increase if company's shareholders contest the corporate control. Our study extends the scope of previous CEO compensation literature by incorporating management power and corporate governance as explanatory variables. The relationship between the CEO compensation and these new factors would deepen our understanding about the CEO compensation mechanism under different companies' performance. Our study is useful for the Chinese listed companies to regulate CEO salaries, especially for different types of companies to design executive compensation.